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Financial accounting and statements: What you need to know

Understanding financial accounting and statements is crucial to keep your business financially healthy and growing.

What is financial accounting?

Financial accounting is the aggregate of your accounting data that details the finances of an entire business that is meant to be shared externally as well as internally. Financial accounting is typically reported at given time periods over the financial year (quarterly) that are shared externally to detail the overall performance of a business via official financial statements.

Why is financial accounting important?

Financial accounting is essential in evaluating and detailing the overall value of a business by reporting on its profit or loss, and the valuation of its assets and liabilities over a specific financial time period.

It's reported via official financial statements that are shared both internally and publicly to inform current and prospective stakeholders of the current financial performance of a business. This in turn has a huge impact on the official valuation of a business, and is bound by law to specific regulations, and it’s why financial accounting must be precise.

How is financial accounting different from accounting? 

There are several key differences. Whereas financial accounting details overall financial performance of an entire business and is meant to be shared externally with the public, accounting (aka managerial accounting or bookkeeping) is the recording, tracking, and reconciling of business transactional data that can be drilled down into great detail and is only shared internally within a business-never externally.

The two fields even have different certifications: Certified Public Accountants (CPAs) are trained in financial accounting, while Certified Management Accountants (CMAs) are trained in managerial accounting/bookkeeping.

Furthermore, financial accounting is focused on overall financial performance of an entire business, and has specific standards and legal regulations that CPAs must adhere to in reporting official financial statements. On the other hand, accounting is operations-focused to determine where, when, why, and how credits come into and debits exit the business.

There are no set regulations on bookkeeping, however there are certainly best practices and methods in order to keep accounting data accurate.

What are the different types of financial statements?

There are four different types of financial statements:

Balance sheets are formal reports that provide a snapshot of the sum of a company’s assets, liabilities, and shareholder equity for a given reporting period. Ideally, a company is financially healthy if its assets are equal to or “balance” the sum of its liabilities and shareholder equity.

Income statements detail the revenue a business earns less the operating costs and expenses to provide the net profit or losses over a given financial reporting period. If a company has shareholders, Earnings Per Share (EPS) are also reported within income statements, and detail how much money shareholders would receive if a business were to disburse earnings to shareholders over that time period.

Cash flow statements report the inflows and outflows of cash during a given financial reporting period. This details the net increase or decrease in cash generated, and helps in determining whether a business has enough cash on hand to cover expenses and purchase assets. Cash flow statements typically consist of the cash flow data of operating activities, investing activities, and financing activities.

Statements of shareholders’ equity simply details the retained earnings of a business over a given financial reporting period and is included in the company balance sheet. The retained earnings refers to the profit or loss of a company at the beginning and the end of the reporting period detailed in the statement.

The right financial accounting software can help grow your business

Sage Accounting includes all the tools and features you need to execute financial accounting functions with precision.

Get organized, effortlessly

Stay on top of your paperwork. Connect your bank feed and accurately and automatically import and categorize transactional data into your books. Stop wasting time and energy on admin, and spend more time focused on understanding and growing your business. 

  • Leverage AutoEntry to automate document capture accurately.
  • Setup automated bank feeds to keep your books updated in real time.
  • Easily set up bank rules to automatically categorize transactions.

Get paid quickly

Stay in the black with healthy cashflow with automatic invoicing, including providing an easy method for clients to pay electronically right on the invoice. No more chasing down clients for payments. 

  • Create professional, custom, ad-free invoices from anywhere.
  • ‘Pay Now’ button for your clients convenience directly on the invoice.
  • Automatically send recurring invoices.
  • Invoice tracking notifications and alerts so you’re always in the know.

Get insights and increase profitability

Make informed decisions with real-time insights. Customizable dashboards show you exactly what you want to know and give you financial snapshots so you can take control of key business decisions. 

  • See money-in/money-out and track cashflow.
  • Customize dashboards to suit your business-specific KPIs.
  • Quickly and easily define timelines, view budgets vs actuals and export to Excel.
  • Add unlimited users so everyone is in the know.

Get tax and compliance right

Taxes don’t have to be complicated. Organize all your data in one place so you or your accountant can calculate precise tax payments. 

  • Eliminate sudden surprises with accurate future tax payment estimates
  • All data and documents in one secure place for simple, fast, accurate GST submissions.
  • Your data is always secure and backed up regularly.

Choose the best financial accounting software for your small business

You can cancel or upgrade at anytime. No long-term contracts, commitments or hidden fees.

Start

Great for sole traders and freelancers.
Get 50% off for 3 months
$17.00
$8.50 /month
You save $25.50
  • Create and send unlimited sales invoices
  • Get paid faster with integrated payments
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate your GST/HST to submit to CRA
  • Supports 1 user
  • Sync your Sage Payroll data
  • Bilingual interface and support in English and French
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Standard

Great for small businesses.
Get 50% off for 3 months
$39.00
$19.50 /month
You save $58.50
  • Create and send unlimited sales invoices
  • Get paid faster with integrated payments
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate your GST/HST to submit to CRA
  • Sync your Sage Payroll data
  • Bilingual interface and support in English and French
  • Supports unlimited users
  • Run advanced reports
  • Send unlimited quotes and estimates
  • Forecast cash flow
  • Manage purchase invoices
  • Automate receipt capture

Plus

Great for growing small businesses.
Get 50% off for 3 months
$55.00
27.50 /month
You save $82.50
  • Create and send unlimited sales invoices
  • Get paid faster with integrated payments
  • Track what you're owed
  • Automatic bank reconciliation
  • Calculate your GST/HST to submit to CRA
  • Sync your Sage Payroll data
  • Bilingual interface and support in English and French
  • Run advanced reports
  • Send quotes and estimates
  • Recurring invoicing
  • Manage purchase invoices
  • Track income and expenses by projects and departments
  • Forecast cash flow
  • Automate receipt capture
  • Invoice in multiple currencies
  • Multi-currency banking
  • Manage inventory

1.  Get 50% off for 3 months or try free for 1 month, then $17/$39/$55 +tax/mo (tier depending). Offer valid for new customers only on monthly subscriptions of Sage Business Cloud Accounting. After the promotional period, the monthly subscription rate will renew at the then current rate. May not be combined with any other offers or discounts. To ensure continuous service your subscription plan is an automatically renewing plan. Subsequent months will automatically be billed to the same credit card each month on your anniversary date of purchase. You may terminate the plan at any time prior to your renewal data and not be charged for the renewal.

2. Not all Accounting features available on the mobile app. Mobile devices sold separately and a data plan is required. Data access is subject to cellular provider network availability and occasional downtime due to system maintenance.

Financial accounting software FAQs

Financial accounting software is a program that organizes, syncs, and automates accounting and bookkeeping processes for financial businesses. Sage Accounting is a type of cloud-based accounting software that works from anywhere with an internet connection. Use it to work on your books and manage cash flow. It will help you track income and expenses while spending less time on financial admin.

Financial accounting software backs up all of your transactions safely and securely to the cloud. That way, you don't have to worry about any painful upgrades or updates and can work from the office or at home. It also simplifies collaborating with your team and your accountant

Financial accounting software is a computer program or online application for recording income and expenses and reconciling transactions in a business bank account. It's designed for collaborating closely with an accountant. Sage Accounting is an example of financial accounting software.

Financial services accounting software like Sage Accounting works by connecting to your business bank account and automatically importing and categorizing transactions, per your specified customizations. With your account data synced with Sage Accounting, you can generate powerful insights and present them with sleek, easy-to-read reports to make the best decisions for your financial services company.

Sage Advice for financial service companies

Read articles, reports and blog posts to get the latest on financial accounting.

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